India's coffee grower set to cash in on boom in global prices

The domestic production is set to be highest ever in the range of 340,000 tonnes

Indian coffee growers and exporters can expect better days ahead, both in terms of higher domestic production and prices in the international market. While domestic production is set to be the highest ever, in the range of 340,000 tonnes, current Arabica prices are in the range of 196 cents per lb (pound) — a rise of 94 per cent over an year-ago period, when the prices slipped to a low of 101 cents per lb.

The daily price of the International Coffee Organisation (ICO) composite jumped from 169.63 cents/lb at the beginning of October to a high of 185.09 cents/lb, before falling to 162.08 cents/lb by the end of the month. The monthly average of 172.88 cents/lb is the highest since February 2012, about 6.9 per cent higher than September.

This price swing has been driven almost entirely by weather reports from Brazil, with dryness at the beginning of the month spurring prices higher, before scattered showers dampened any bullish spirits. The discussion is now centred on whether damage to the 2015-16 crop is already irreversible, and to what extent these rains can encourage new flowering, ICO said in its latest report.

Drought in Brazil last year has resulted in the lower crop, which impacted prices globally. This year too, the crop in Brazil is not going to be good, as there is no sufficient rain, a coffee exporter from Karnataka said.

India’s production is estimated at 344,500 tonnes by the state-owned Coffee Board for 2014-15, with Robusta output at 239,000 tonnes and Arabica beans at 105,500 tonnes, about 13 per cent more than the last year’s final output of 304,500 tonnes.

  “The Indian grower did not get the full benefit of price rise last year, as he had sold most of his crop by February and the prices started moving up thereafter. This year, however, the Arabica crop is lower due to white stem borer pest attack. The price rise is not too high for Robusta, whereas the 70 per cent of India’s coffee is Robusta,” said Nishant R Gurjer, former chairman of Karnataka Planters’ Association  and an exporter.

He, however, said the year 2015 is going to be a good year for Indian coffee growers, as they can expect to earn better income with the prevailing prices.

Currently, Arabica parchment is fetching 69 per cent higher price at Rs 11,000 per bag (each bag is 50 kgs) ex-field in Karnataka compared to Rs 6,500 per bag last year. The farm gate price of Arabica Cherry is up 28 per cent at Rs 3,600 per bag compared to Rs 2,800 per bag a year ago.

However, higher prices earned by the grower this year is nullified when compared to increase in the cost of production. The cost of cultivation has increased 10-15 per cent due to rise in wages and input costs, Gurjer noted.